COMMISSIONER OF INCOME TAX Vs. IDEAL ENGINEERS

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Hyderabad Bench (hereinafter referred to as "the Tribunal" for brevity), has referred to this court the following question of law, which is said to arise from the order of the Tribunal passed under Section 254(2) of the Income-tax Act, 1961 (for short, "the Act"), by which the Tribunal recalled the earlier order passed by it in ITA No. 551/Hyd/1986, under Section 256 of the Act for the opinion at the behest of the Commissioner of Income-tax, Andhra Pradesh-I, Hyderabad :

(2.) THE background facts leading to the reference be noted briefly as under: THE respondent-assessee is a company registered under the provisions of the Companies Act and it carries on manufacture of cylinders which are required for keeping gas for petromax lights arid deals in liquid petroleum gas and the petroleum gas is distributed to consumers through dealers. THE assessment year involved is 1980-81 for which the relevant accounting year ended on March 31, 1980. THE assessee returned a loss of Rs. 3,20,064. THE Income-tax Officer determined the net loss at Rs.2,67,680. THE Commissioner of Income-tax (hereinafter referred to as "the CIT", for short), after examination of the records found that the assessee has shown "security deposits collected against empty cylinders of gas" in the balance-sheet as "deposits against cylinders" in a sum of Rs. 16,75,285 as liability. According to the Commissioner of Income-tax, the security deposit was not received by the assessee as trustee or custodian of deposits from the dealers and there is no obligation for the customers to return the empty cylinders nor is there any time-limit for returning the cylinder's. In that view of the matter, the Commissioner of Income-tax was of the opinion that the security deposit should be treated as trading receipts. Accordingly, he issued show-cause notice to the assessee. In response to the show-cause notice, the assessee filed its objections and contended that there was obligation on its part to return the security deposit the moment the customers return the cylinders. It was also contended that there were other dealers in the same line of business and they were not at all disturbed and, therefore, any disturbance in the hands of the assessee would amount to discrimination. It was also further contended by the assessee that the Commissioner of Income-tax (Appeals) was seized of the matter and, therefore, there was no jurisdiction vested in the Commissioner of Income-tax to revise the order in the purported exercise of the power under Section 263 of the Act.

(3.) THE assessee again filed a second miscellaneous petition numbered as MP No. 50/Hyd. of 1986 praying to recall the original order of the Tribunal in ITA No. 551/Hyd. of 1985, dated March 31, 1986, on the ground that the said order contains certain mistakes apparent from the record. THE alleged apparent mistakes were the following :